Achieve floating-rate cost of funds through swap

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Reference no: EM132073379

1. Concerning payback, which of the following statements is true?

a) Payback is no longer used since it ignores the time value of money.

b) Payback can only be used on simple projects since it cannot deal with cash flow.

c) Payback period varies inversely with the benefit-cost ratio: the shorter the payback period, the higher the benefit-cost.

d) Payback is only used for capital intensive projects.

2. If a company that had a fixed-rate liability wanted to achieve a floating-rate cost of funds through a swap, it would pay a:

A. fixed rate to the counterparty and receive a floating rate in return from the counterparty.

B. floating rate to the counterparty and pay a floating rate to the fixed-rate lender.

C. floating rate to the counterparty and pay a fixed rate to the fixed-rate lender.

D. floating rate to the counterparty and receive a fixed rate in return from the counterparty.

Reference no: EM132073379

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